On January 1, 2013, Parent Company purchased 80% of the common stock of Subsidiary Company for $280,000. On this date, Subsidiary had total owners' equity of $250,000 (common stock $20,000; other paid-in capital, $80,000; and retained earnings, $150,000). Any excess of cost over book value is due to the under or overvaluation of certain assets and liabilities. Inventory is undervalued $5,000. Land is undervalued $20,000. Buildings and equipment have a fair value which exceeds book value by $30,000. Bonds payable are overvalued $5,000. The remaining excess, if any, is due to goodwill.

Required:

a.	Prepare a value analysis schedule for this business combination.
b.	Prepare the determination and distribution schedule for this business combination
c.	Prepare the necessary elimination entries in general journal form.

a) Value analysis schedule

Company Implied Fair Value	Parent Price	NCI Value
Company fair value
Fair value identifiable net assets
Goodwill

b) Determination and distribution schedule:

Company Implied Fair Value	Parent Price	NCI Value
Fair value of subsidiary
Less book value:
C Stk
APIC
R/E
Total S/E
Interest Acquired
Book value
Excess of fair over book
Adjust identifiable accounts:
Inventory
Land
Bldgs & Equip
Bond Pay Discount
Goodwill
Total

c) Elimination entries:

ELIMINATION ENTRY 'EL'
C Stk-Sub
APIC-Sub
R/E-Sub
Investment in Sub
200,000	200,000
ELIMINATION ENTRY 'D'
Inventory
Land
Bldgs & Equip
Bond Pay Discount
Goodwill
Investment in Sub
R/E-Sub (NCI)
100,000	100,000

Answer rating: 100% (QA)

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